Are Online and Offline Advertising Substitutes or Complements? Evidence from U.S. Food Industries

Xi He, Rigoberto Lopez, Yizao Liu

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

This article investigates the substitution between online advertising (ONLA) and offline advertising (OFFLA) as well as the impact of adopting ONLA on the total cost of advertising. We estimate an advertising translog cost function at the product-brand level, using monthly observations between 2005 and 2011 for each of three industries: beer, ready-to-eat cereals, and carbonated soft drinks. Although in all three industries we find that traditional media (TV and print) advertisements are close substitutes, we also find that ONLA is a complement to, rather than a substitute for, both TV and print media advertising. This may be explained by ONLA's targeting younger market segments and acting as a reinforcement of TV and print media advertising exposure. Further results show that the adoption of ONLA has lowered the cost of advertising for achieving a sales target and that its complementarity effect is weakening over time.

Original languageEnglish (US)
Article number20170031
JournalJournal of Agricultural and Food Industrial Organization
Volume15
Issue number2
DOIs
StatePublished - Mar 26 2018

All Science Journal Classification (ASJC) codes

  • Food Science
  • Business, Management and Accounting(all)
  • Economics and Econometrics

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